Odds are, if you are invested in equities, you have been pleasantly surprised recently when you check your accounts. With the S&P 500 and other major indexes at or near all-time highs, things feel pretty good. We’re wrapping up Q2 earnings season with approximately 88% of S&P 500 companies having reported their results as of August 7. Earnings were largely above expectations according to FactSet, with 86% of companies having beaten analyst expectations. Companies are doing this while navigating an ongoing war in the Middle East, sticky inflation staying above target, and rising bond yields. Despite these headwinds, businesses have been resilient and performed well, with the S&P 500 up roughly 13% year to date as of August 12, 2026. So now it’s time to sit back and get ready for football season, right? As the great Lee Corso is known to say, “Not so fast, my friend!”
The cardinal sin of being a long-term investor is having to sell at a loss.
Stock prices go up; stock prices go down. Short-term price swings are something we cannot predict. We don’t know if share prices will continue to go up from this point or if we will experience a 20% correction tomorrow (spoiler alert: those happen about every 4 years). Anyone who tells you they know is lying to you. We all do our best to form an educated guess about what equity returns will be in the near term, but no one really knows. Based on historical returns, our firm believes that over the long term, the value of the great companies of the world will continue to outpace inflation and serve as the primary growth asset for most investors.
The only thing that is certain is uncertainty. And while we don’t know exactly where we are going in the near term, we know we are at all-time highs today. This is a perfect opportunity to revisit your asset allocation and make sure you can weather any short-term price swings in the market.
For a client in retirement, our general framework is to determine the total cost of 10 years of living expenses, net of any income sources such as Social Security, and discount it to today’s present value. That figure represents the amount we target for fixed income allocations. This isn’t a one-size-fits-all number, but rather is the starting point we work from when building a retirement plan. Every retirement plan looks a little different. This is educational rather than a recommendation for any one person’s specific circumstances. If you’d like to discuss how this might apply to your situation, please reach out to your advisor.
Some might call this approach conservative, but the data shows that the S&P 500 is up about 94% of the time on a 10-year rolling period, dating back to 1937. Of the five negative 10-year periods, three periods occurred during the Great Depression (ending in 1937-1939), and the other two were driven by the dot-com collapse and Great Financial Crisis (ending in 2008-2009). The point isn’t to avoid the 94% of positive returns, but to ensure the 6% of negative returns doesn’t force your hand. Building your plan with a foundation of fixed income makes it far less likely you’ll have to sell equities at a loss to support your lifestyle.
Source: Aswath Damodaran, NYU Stern School of Business - “Historical Returns on Stocks, Bonds and Bills" https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html. S&P 500 returns include price appreciation and reinvested dividends.
These down periods are extremely uncomfortable, especially for clients who are in retirement. We refer to them as “temporary loss in value” because you haven’t realized any actual losses until you sell. Once you sell, the loss becomes permanent. Having the ability to ride out any downturn by relying on your fixed income allocation is the key to wealth protection.
Asset allocation is the most effective way to manage portfolio risk.
So maybe it is time to gear up for football (and start planning a Super Bowl trip to see the Jags win it all this year), but make sure your fixed income is doing the blocking and tackling for your portfolio. If you’re carrying enough cash and bonds to cover your expenses during a downturn, a 20% correction becomes a paper cut instead of a permanent wound. How you win at creating and protecting wealth is never by becoming a forced seller.
If you aren’t sure how many years of expenses you’ve got covered right now, or you’ve had a material change in your lifestyle, that’s something you can cover on a quick call with your advisor.
Past performance does not guarantee future results. Investment advisory services are offered through Ullmann Wealth Partners. Additional information is available in Form ADV.